To Make the Predictions Clear

The following events are going to happen, this is not a question but a matter of time.  I've listed a sequence of events in the order I perceive them happening.   The order could be way off and surely I am leaving out steps, but it will all happen in my lifetime, likely the next 5-10 years.

- Bank downgrades and bank runs across Europe (continuing process throughout the next 5 bullets)
- Greece leaves Euro, defaults
- Spain leaves Euro, defaults
- Italy leaves Euro, defaults
- Portugal leaves Euro, defaults
- Ireland leaves euro, defaults
- America officially recognizes itself in a "double dip" recession
- Housing Prices take out 2007-2008 lows and create new low.
- QE3:  a monetary stimulus package of at least 200 billion.
- gold/silver take out previous highs
- Downgrades of american banks
- Treasury bonds lose value, Fed becomes only buyer of debt.
- QE4?
- YoY or MoM inflation surpasses Fed target
- Interest rates forced to rise
- American Bank downgrades, failures, and bailouts
- Riots/Protests
- Bond market collapse
- Global Depression
- Dollar loses reserve currency status

Ahead of Today's FOMC Minutes Release

There is a strong case to argue that the FOMC minutes will bring nothing but bad news.   Released at 1:00 pm CT today, the fed will either do one of two things: They will confirm the notion that everything is peachy, but emphasize that they are willing to take measures if the "euro contagion" spreads our way.  OR, The fed will express  neutrality with regard to the current conditions and hint that QE3 is a necessary tool that will be employed if conditions deteriorate.   The former is more likely and will likely add some to the recent dollar strength and force more more calls as certain equities/commodities hit new lows and we break through some stop losses.  The latter should send the dollar pummeling like a fat kid on a steep hill.  This summarize the consequences, equities and commodities are either going to get pummeled or an expectation bubble is going to be created.  I figure I'll be disappointed in the end either way.   

As usual though, this won't stop me from profiting.  Since I already have open positions short the EURUSD and the AUDUSD,  i'm going to weather through the event risk and hope the FED doesn't get too dovish just yet.  

Banks will Fail

JPM fell 8% today, this is not the main show, but a preview of what is to come.  The financial system is entirely reliant on QE and low interest rates.  The velocity of money is the only thing that matters right now.  For the financial system to remain in tact, a continuous (not just continuous but continuously growing) stream of liquidity needs to be introduced into the market.  Banks cannot afford higher interest rates, which would simultaneously force them to tighten loaning standards and discourage them from obtaining new liquidity through loans.  Suddenly, interest on debt and toxic asset risks would actually matter... but how can anyone possibly expect to profit off loans when artificially low interest rates were set that fail to compensate the bank for the risk of default?  We forget the purpose of an interest rate in the first place.  In a free market, interest rates are based on the risk of default, and set such that banks can make a profit despite the risk of default.  We have forgotten this, but if money velocity is fast enough default risk can be lowered while increasing credit availability.  But what happens when money velocity slows???

  With the existence of the FDIC, all banks hold near the minimum 10% reserves (electronically...the actual amount of cash on hand is far less).  Thanks to fractional banking, most institutions are linked to one another such that the failure of one institution will lead to the failure of others.  Thus it will not be 1 bank that fails, it will be many.  It will not be 10 years before banks need another bailout, it will be 2, or less.  Will we bail them out? Probably, but if we do its just a matter of time (~5 years or so) until we will have to do it again.  Until the underlying problems are solved (Federal reserve, interest rates, FDIC), this cycle will repeat over and over.  The crash is not the problem, the problem is currency policies.  Crash is the solution, and we can then start anew.

It can happen

"By the end of November 2001, people fearing the worst began withdrawing large sums of money from their bank accounts, turning pesos into dollars and sending them abroad, causing a run on the banks. On 2 December 2001 the government enacted a set of measures, informally known as the corralito,^[29][30] that effectively froze all bank accounts for twelve months,^[31][32] allowing for only minor sums of cash to be withdrawn, initially announced to be of just $250 a week.<sup>[33]" - Argentina


It can happen, it has happened, and it will happen.</sup>